Analyzing the black consumer

August 14, 1995|By Chicago Tribune

CHICAGO -- In the publishing world, an unfilled niche is like an empty swing in a playground: You've got to jump on it.

Ken Smikle, founder of Target Market News, a market research and desktop publishing firm that publishes a monthly newsletter of the same name and an annual report called "The Buying Power of Black America," did just that.

"While an editor at Black Enterprise magazine, I could see millions of dollars flowing in and out of the marketing business in efforts targeted at black consumers, and no publication was writing about that," Mr. Smikle said. "I saw the possibility for a new publication devoted exclusively to this area."

That was five years ago, and now the firm and the 42-year-old publisher are a primary source of information on the African-American consumer market.

"There has always been a need for research on the African-American market. Major research companies . . . have not really given black consumers the emphasis that many of our corporate customers would like," Mr. Smikle said. "That lack of research has stymied the growth of African-American marketing."

The second annual "Buying Power of Black America" report was released in July.

Among other things, it showed that the buying power of African-Americans was about $304 billion in 1994. That number has doubled since 1980, Mr. Smikle said. He attributes the increase to a growing African-American middle class.

According to the report, African-Americans are spending less on big-ticket items such as cars, furniture and appliances, and more on entertainment and leisure, consumer electronics and travel. It also showed that they are spending less on alcohol and tobacco products.

"These numbers reflect what's happening in the African-American community," said Marcus Alexis, who teaches economics at Northwestern University and management courses at its J. L. Kellogg Graduate School of Management. "While many people are stuck in poverty, others have achieved middle-class status."

"A lot of surveys focus on intentions of black consumers," Mr. Smikle said. "It's equally, if not more, important to look at how the dollars are actually spent and how those purchases change from year to year."

The company compiles consumer market information from the Bureau of Labor Statistics and the Census Bureau, as well as from private sources. The information, he said, is not always easy to compile because there are not a lot of secondary sources.

"We don't do anything different from any other company," Mr. Smikle said. "The issue is that they [other companies] are not interested."

Mr. Smikle works with two assistants and several free-lance writers across the country through what he calls a virtual corporation -- electronic communication via facsimile machines and modems. He said this setup allows him to be both a parent and a publisher.

To develop the annual report, Mr. Smikle said he analyzes the numbers and sets up a spreadsheet. The numbers are then tabulated and reviewed for different trends, a process that takes about three months.

"We look at the data against trends and other information gathered," Mr. Smikle said. "The report defines the opportunities for the reader, and the newsletter defines how others are moving the market."

In the monthly newsletter, which has a controlled and paid circulation of 5,000, Mr. Smikle said he uses the information in a variety of ways.

"We provide information about developments in the industry that are for the most part ignored by other media outlets," he said. "This information can affect how millions of dollars are allocated or earned."

Company clients such as American Airlines, USAir, Procter & Gamble, General Motors, Chrysler, McDonald's, AT&T, Ameritech and Tribune Co. subscribe to the publication, which has a one-year subscription price of $40.

So does Don Coleman & Associates, an advertising agency based in Detroit.

"It's a valuable service that Target Market News is providing," said Chuck Morrison, the agency's executive vice president. "There is no other forum to find out what other companies are doing on a consistent basis."

Other revenue streams for Target Market News come from advertising dollars and from sales of mailing lists of African-American media outlets, public relations firms and marketing firms, as well as from conferences to help companies better understand opportunities in the African-American market.

Target Market News is also planning to develop on-line databases of the information collected.

Though Mr. Smikle would not disclose company revenues, he predicted the business would reach the million-dollar mark next year.

Since Target Market News began, Mr. Smikle said, there is increasingly more information available about the African-American market, and companies are increasingly recognizing the importance of addressing black consumers. He added that companies such as Sears, Ford, Coca-Cola and McDonald's recognized the financial strength of the market years ago.

"Although the majority of companies and industries are still moving cautiously or not at all, by and large, companies No. 1 in their industries have been doing this for a very long time," Mr. Smikle said.

"In a country that is becoming more and more diverse and niche-oriented, it is important and imperative that companies learn how to market to smaller segments."